Chao Blasts Critical ABC Pension Reform Report

February 18, 2005 (PLANSPONSOR.com) - The Bush
Administration's point person on proposed defined benefit
pension reforms on Friday defended the administration's
recently released plan and termed a critical report about the
proposals "disappointing."

US Secretary of Labor Elaine Chao’s statement came
after the American Benefits Council (ABC) released a
summary of its proposals to bring the pension system up
to par that was sharply critical of many of the
Administration’s ideas.

“It is disappointing that the report fails to
recognize the reality that the pension funding rules are
broken, causing workers and retirees harm and putting
taxpayers at risk,” Chao said in her statement. “We must
act now and adopt comprehensive reforms that give
employers new tools to better fund their plans and
provide workers, regulators and investors with better and
more timely information about a plan’s financial
status.”

The ABC report
asserted that a series of problems with the
Administration’s plan “would result in far fewer defined
benefit plans, lower benefits, and far more pressures on
troubled companies that jeopardize the companies’ ability
to recover.”

As outlined by the ABC, the problems
included:

a “dramatic” cut in predictability for funding
and plan premiums

a “counterproductive and troubling” use of
credit ratings

a strong disincentive to prefund

an increase in premiums at pension insurer the
Pension Benefit Guaranty Corporation (PBGC)

improperly forcing sponsors of terminating
at-risk plans trying to determine their liabilities
to assume that all employees would take lump-sum
distributions and retire early.